Legislative Fight Over Loot Boxes Heats Up with Pair of Hawaii State Bills

Two new bills recently introduced to the Hawaiian State Legislature—HB2727 and HB2686—seek to regulate the usage of “a system of purchasing a randomized reward” (a.k.a. loot boxes) within gaming. Together, the bills would require games containing these systems to disclose that usage on the labeling and prohibit those games from being purchased by people under the age of 21.

“In recent years, video game publishers have begun to employ predatory mechanisms designed to exploit human psychology to compel players to keep spending money in the same way that casino games are so designed,” argues HB2686. “These mechanisms allow players to purchase chances at winning rewards within games, similar to a slot machine. These predatory mechanisms, a common variety of which are known as loot boxes, can present the same psychological, addictive, and financial risks as gambling. There are even online marketplaces where players can buy and sell digital items won from loot boxes and other gambling-like mechanisms in many games, enabling players to effectively cash out their winnings.”

So far, not much has happened with either bill—both were referred to the House Committee on Consumer Protection & Commerce. HB2727 (disclosure) was called up for a hearing this week, and on Wednesday was passed with a 6-3 vote. If it passes the Legislature, HB2727 would require games to disclose probability rates for loot box rewards, and would mandate a bright red label on the packaging of any games that use loot boxes.

HB2686 is significantly more impactful, and would make it illegal for any retailer to sell such a game to anybody under 21. So far, no action by the CPC committee has taken place. These bills come following a media push by their primary sponsor, Chris Lee.

If they pass, both bills would have a significant impact on the gaming industry. Even though Hawaii is a relatively small state with a population of just over 1.4 million, two factors would come into play: (1) retailers would have to build systems that follow these regulations for Hawaiian marketplaces, including digital ones, and (2) legislators for other states would be emboldened to introduce similar bills.

If they pass, both bills would have a significant impact on the gaming industry.

California Assembly member Bill Quirk, for example, introduced a bill similar to HB2727 in the California State Legislature on Monday. And last month, three Washington state legislators introduced a bill that would ask the state’s gambling commission to investigate whether loot boxes are a form of gambling, and, if so, what regulations should be implemented to govern them.

As for gaming industry organizations, the Entertainment Software Ratings Board also went on record last October stating that it doesn’t consider loot boxes as gambling. And, in testimonials given at the CPC hearing, other retail groups including the Entertainment Software Association, voiced unanimous opposition to the pair of bills. That said, all organizations claiming to represent youth health were unanimously in support of the bills, a position that was echoed yesterday by U.S. Senator Maggie Hassan (New Hampshire) who sent a letter to the ESRB asking it to review its ratings process in regards to loot boxes.

It’s clear that the fight over loot box regulation is starting to heat up, and with actual bills now on the table, regulation may start landing sooner rather than later. With no clear legal precedent—most cases in the realm of loot boxes/skin gambling/in-game items as currency have not actually dealt with the actual merits (and rather have targeted illegal advertising by ‘social media influencers,’ while the class action lawsuit against Valve has disappeared)—legislators are now taking up the mantle to fixing the perceived problem.

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